June 2022

State Updates

 

California issues emergency rule for CalSavers

05/05/22

Author: ADP Admin/Wednesday, May 4, 2022/Categories: Compliance Corner , State Compliance Update, California

The California Treasurer has published an emergency rule that defines key terms and clarifies employer responsibilities under the CalSavers Retirement Savings Program. The emergency rule took effect immediately.

The Details:

Background:

CalSavers is a state-based payroll withholding savings program using Roth (post-tax) individual retirement accounts. All employers with five or more employees must either register with CalSavers or offer a qualifying retirement plan.

Eligible Employer:

Under the emergency rule, an employer is defined as an entity, whether for profit or not for profit, that is an employer under the California Unemployment Insurance Code.

The emergency rule defines an eligible employer as one that:

  • Has five or more employees, as determined under the methodology described below, at least one of whom is an eligible employee;
  • Doesn’t maintain or contribute to a qualifying retirement plan; and
  • Isn’t the federal government, the state, any county, any municipal corporation, or any of the state’s units.

Eligible employers have certain responsibilities regarding CalSavers (see below).

Exempt Employer:

By contrast, exempt employers aren’t permitted to participate in CalSavers. The emergency rule defines an exempt employer as one that:

  • Has fewer than five employees, as determined under the methodology described below, or has five or more employees, but doesn’t employ any eligible employees;
  • Maintains or contributes to a qualifying retirement plan; or
  • Is the federal government, the state, any county, any municipal corporation, or any of the state’s units.

 

Previously, the definition didn’t expressly include employers with five or more employees but don’t have any eligible employees

 

Eligible Employee:

The emergency rule defines employee as an individual who has the status of an employee under the California Unemployment Insurance Code and who receives a W-2 with California wages. An eligible employee is an employee of an eligible employer and is at least 18 years old.

Note: In the case of an eligible employer that is a sole proprietorship, partnership, or a limited liability company treated as a sole proprietorship or partnership for federal income tax reporting purposes, the definition of employee also includes a sole proprietor, partner, or member of a limited liability company.

Methodology for Determining Number of Employees:

To determine whether an employer is an eligible employer for a calendar year, the number of employees is the average number of employees during the previous calendar year, as reported to the Employment Development Department on Form DE 9C (Quarterly Contribution Return and Report of Wages) for the quarter ending December 31 and the preceding three quarters.

Employers that haven’t submitted a Form DE 9C for a full calendar year are eligible employers if they have submitted at least one Form DE 9C the preceding quarter and otherwise meet the definition of an eligible employer.

Employers that haven’t submitted a Form DE 9C for a full calendar year are subject to the registration deadline only after they have submitted a Form DE 9C for the quarter ending December 31 and the preceding three quarters.

Registration Deadline:

Eligible employers that have employed five or more employees for more than one continuous calendar year, based on the methodology described above, must register with the program no later than June 30, 2022.

Note: Employers with more than 50 employees had an earlier registration deadline.

An employer that later becomes an eligible employer due to having an average of five or more employees for a calendar year must register with the program no later than December 31 of the year in which the employer is notified by the program about their eligibility.

Employer Responsibilities:

Eligible employers must register with the program using one of the following methods:

  • Via the program’s website (employer.CalSavers.com);
  • By phone (855-650-6916);
  • By overnight mail (CalSavers, 95 Wells Avenue, Suite 155, Newton, MA 02459); or
  • By regular mail (CalSavers, P.O. Box 55759, Boston, MA 02205-5759).

To register, an eligible employer must provide the following information:

  • Employer name, legal name, and “doing business as” name, if applicable;
  • Federal Employer Identification Number or, if unavailable, the California Employer Payroll Tax Account Number;
  • Employer mailing address;
  • Employer physical address; and
  • Name, title, phone number, and email address of an individual designated by the employer as the primary contact for the program.

Within 30 days of registration (or within 30 days of the date of hire for employees hired after registration), eligible employers must provide the following information to the program for each eligible employee:

  • Full legal name;
  • Social Security Number or Individual Taxpayer Identification Number;
  • Date of birth;
  • Physical address;
  • Phone number, if available; and
  • Email address(es), if available.

Note: Eligible employees are entitled to a CalSavers information packet. The program is responsible for distributing the packet to the employee and will do so within 10 days of receipt of the employee’s information.

Employers must remit to the program each employee’s contribution each payroll period no later than the first payroll period following 30 days after notification by the program of an employee’s enrollment. Employers must remit all withheld compensation to the program as soon as administratively practicable and cannot exceed seven business days from the date of deduction.

Next Steps:

  • Read the emergency rule in full.
  • Determine whether you are an eligible employer.
  • If you are an eligible employer, ensure compliance with the emergency rule and meet applicable deadlines.

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